July 16, 2018 / 7:59 PM / 2 months ago

Breakingviews - Elon Musk outburst puts Tesla board on the spot

NEW YORK (Reuters Breakingviews) - Elon Musk has put the board of Tesla on the spot. The $52 billion electric-car maker’s chief executive on Sunday sent a tweet suggesting, without evidence, that one of the men involved in rescuing 12 Thai boys and their soccer coach from flooded caves was a pedophile. Such a gratuitous and potentially libelous act deserves punishment. The trouble is, Tesla’s directors may be reluctant to mete it out.

SpaceX founder Elon Musk pauses at a press conference following the first launch of a SpaceX Falcon Heavy rocket at the Kennedy Space Center in Cape Canaveral, Florida, U.S., February 6, 2018. REUTERS/Joe Skipper

The nine-member board is packed with Musk’s allies. One of them is his brother, Kimbal. Lead independent director Antonio Gracias runs a private-equity fund Musk has backed and was a director at another of Musk’s firms, SolarCity, before Tesla bought it in 2016. Others have connections to Musk’s SpaceX venture.

And neither Tesla nor SpaceX has yet decided what to do with director Steve Jurvetson, on leave from both after his own venture-capital firm, DFJ, ousted him last November during an investigation into personal misconduct.

Even with a different board, there’d still be a big problem: Musk’s and Tesla’s fortunes are essentially symbiotic. If his future were in question, the money-losing company would probably find it hard to raise capital, explain away missed deadlines and everything in between.

Musk’s prominence also narrows down the board’s options. Firing him for his “pedo guy” tweet could precipitate a crisis of confidence among investors. Unlike the eventual ouster of Travis Kalanick at privately held Uber, for a capital-hungry public company that might prove terminal.

Directors could consider stripping him of either the chairman or chief executive title. Or they could dock his compensation. KB Home boss Jeffrey Mezger lost a quarter of his bonus last year after a vulgar rant at neighbor Kathy Griffin. Removing 25 percent of what Musk could earn under his ambitious 10-year bonus package could deprive him of a potential $15 billion payout.

At the very least the board should require him to apologize and perhaps swear off Twitter. To do nothing would send a worrying message: that directors are unwilling or unable to rein in Musk’s more troubling traits. Most shareholders may still be unfazed for now – the stock was only down around 3 percent by Monday afternoon. But such a laissez-faire attitude could come back to haunt them.

Breakingviews

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